Fuchs SE

Good afternoon, ladies and gentlemen. This is Andreas Schaller speaking. On behalf of Fuchs SE, I wish you a very warm welcome to today's conference call on the annual results of 2025 and the outlook for 2026. With me on the call today is our CEO, Stefan Fuchs, and our CFO, Esma Zaglic. As always, Esma and Stefan will run you through the presentation, which is then followed by a Q&A session. All the documents for this call are available on our homepage, and we assume that you have them in front of you. Please be also aware of our disclaimer on the last page of our presentation. And now it's my pleasure to hand over the call to Stefan for some introductory remarks. Please go ahead, Stefan.

Yes, hello. Also from my side, with the best regards from sunny Mannheim. So I don't know where you are, but we have a lovely day here. I think Esma and I will present you very solid figures for the year 2025, which are in line of the outlook from the end of July of last year. If you remember, 2024 was the all-time high, and I think we met that number. We even exceeded it a little bit. We had a strong cash flow, and I think we have an interesting dividend proposal, the 24th increase in a row. And furthermore, we want to call sales and earnings in the year 2026. And to learn more of that, I will hand over to my colleague, Esma.

Thank you, Stefan. And hello, and also a very warm welcome from my side. Today, I will walk you through 2025 financial performance, starting with the key highlights. So for us, 2025 proved to be a very solid year, demonstrating financial strength operational resilience, and a well-balanced strategic position. After a challenging second quarter, we delivered a very strong third quarter, and this momentum continued into the fourth quarter as well, which allowed us to deliver on our revised full-year target of 2025, and in some areas, as Stefan indicated, even outperformed us. sales reached 3.6 billion, an increase of around 1% year-on-year and a new all-time high. This growth reflects both organic and external growth and was achieved despite challenging market environments and significant currency headwinds we have seen. If it came in at 435 million, a slight uptick, 1 million, above last year, making another record level. This underlines the quality of our earnings and the effectiveness of our cost discipline, which we have put in place. Free cash flow before acquisitions came in with $316 million, up by 3% compared to last year, with a very strong cash conversion of 1%. Earning per share increased by 2% year over year, and our FOX value-add reached 249 million. Now, turning to the next slide, let me briefly comment on the quarterly sales development. As usual, the fourth quarter is seasonally the weakest due to the holiday season. Nevertheless, compared to last year, we achieved a slight increase in revenue which is a solid performance, again, considering the significant negative currency headwinds we have faced. Looking at the EBIT on a quarterly base, we see also the typical seasonal pattern. However, on a year-over-year base, EBIT in Q4 improved by 9%, supported by positive mixed effects and lower cost effects. I also would like to highlight that our second half year, 2025, was the strongest half year we ever had. Now, let's look at the main drivers of our sales development. Our sales for 2025 were 3.6 billion, as mentioned. Both organic growth and acquisitions were contributing positives. Organic growth was mainly driven by Asia Pacific and the Americas, reflecting successful business wins across multiple segments and underlining the strength of our local-to-local strategy. On the external growth side, the key contributor were the acquisitions of LoopCon and Stroop, as well as our new additions in 2025, Boss and Azure. Currency headwinds were affecting our top line, unfortunately, negatively with 2%. Overall, we can say our underlying sales development was clearly positive. Turning to our KPI summary, I have already covered sales side. Moving over to our gross margin, our gross margin improved to 34.9% in 2025, an increase of 40 basis points compared to last year. Functional costs rose by 4% year-on-year, mainly driven by additional costs from recent acquisitions, one-off expenses for large customer projects, IT investments we have put in place, and inflation-related salary and wage increases. And as you all will recall, we implemented a cost avoidance and efficiency measure program in the middle of last year to counteract higher cost basis. And what I can say, we are very satisfied with the results we have achieved. Our EBIT reached $435 million, $1 million above last year, with an EBIT margin of 12.2%. This also means we achieved our revised outlook from July and delivered another record result. Our capital expenditure increased year-on-year preliminary due to higher investments to our Transform to Grow project, which is the preparation of our S4HANA rollout. Networking capital improved to 21% of annual sales. It is below the prior year level and contributed positively to our cash flow. In 2025, free cash flow before acquisitions amounted to $316 million, representing a year-over-year improvement of $10 million. So let's take a closer look to the region, starting with EMEA. Sales increased slightly, mainly driven by acquisitions, which also compensated for the softer organic growth. The decline in organic sales was preliminary due to challenging market environments in Europe, especially driven by the weak automotive manufacturing sector. At the same time, we saw positive developments in Germany, South Africa, and Sweden. And despite all market challenges, total profitability in EMEA remained strong and was slightly above the prior year's level. which also highlights the robustness of the region. Moving to Asia-Pacific, for the first time, sales in the region exceeded 1 billion, despite all significant negative currency effects. Organic growth was very strong, with 7% mainly driven by China, Australia, and India, but also the other countries contributed positively. This clearly reflects the benefit of our investment in local production, which continue to pay off. From a profitability perspective, Asia-Pacific developed very positive. EBIT increased by 12% year-on-year with positive contributions from almost all countries, underlining also the strong overall performance of the region. now turning to north and south america sales increased in the region by two percent year on year supported by a very strong growth of seven percent coming from several segments on the other hand the growth got largely upset by negative currency effects a similar effect as we have seen in asia pacific External growth was driven by the acquisition of our trading partner in Peru, as well as imports. But unfortunately, the EBIT declined by 18% year over year, mainly due to negative mixed effects and higher costs. Now, let's have a look to our net operating working capital. Overall, we see the usual seasonal pattern, an increase over the course of the year followed by a reduction towards the year end. Compared to the end of 2024, our net operating working capital improved both in absolute terms and also as a percentage of sales from 22.3% to 21%, which reflects a disciplined working capital match. Moving over to our next liquidity, our free cash flow before acquisition developed very positively and strong, remaining or reaching $316 million for the full year, driven by better earnings after tax, capex that remained below our depreciation level, and the improvement in our working capital. Dividend payments and spend for acquisition were the main cash outflow for 2025. And so, as a result, our net liquidity improved year over year by 110 million, reaching 151 million for the full year. And based on our solid earnings performance and strong cash generation, we will continue with our progressive dividend policy. For 2025, we will propose a dividend increase of 6 cents per share resulting in a dividend of €1.23 per preference and €1.22 per ordinary share. This also represents our 24th consecutive dividend increase. And before we talk about our outlook for 2026, let me briefly reflect on 2025. Last year was a challenging year with a lot of market volatility, FX headwinds, and geopolitical uncertainty. And despite this, we were capable to deliver solid sales, good earnings, and an excellent free cash flow. And I think this performance clearly shows the resilience of our business model. And I also think we can be proud of that, what we have achieved. And let me start the outlook with the raw material, which is the key topic in the current environment. The year started with stable conditions, but the situation changed with the conflict in the Middle East affecting oil and petrochemical supply chain. Our sourcing setup is globally diversified, which gives us actually flexibility. But nevertheless, visibility is currently poor, and it's difficult to foresee all implications as changes happen every day. So we are very closely monitoring the situation and have put countermeasures in place to address possible higher costs, which will occur actually. Looking back into the past crisis, like the COVID time or the financial crisis, we as folks have proven records that we can manage challenging market conditions successfully. And also for this crisis, we are confident that we will navigate through the situation in a successful way as well. As of now, Assuming there are no major disruptions in the global economy and supply chain, our outlook for 2026 is as follows. We expect sales to increase to around 3.7 billion, with growth partly offset by negative ethics effects. This figure also includes the OPEC folks acquisition in Turkey, which we expect to close in the second quarter. It will add around two-thirds of its annual sales of roughly 100 million. EBIT is expected to raise to around 450 million, supported by growth and continued cost discipline. Also here, our acquisition of OPAT books is already included, incorporating the related integration costs as well. SEA is expected at around $250 million, reflecting higher earnings, but also increased capital inflows. Free cash flow before acquisition is projected at around $270 million. Overall, I would say we entered 2026 with confidence and a clear focus on profitable growth and cash generation. We also remain mindful of any macroeconomical, geopolitical and cost uncertainties which are currently not foreseeable. And finally, a reminder, our Capital Market Day will take place on April 16th in Mannheim. So we are very much looking forward to welcoming you in person and having an open dialogue about our future steps. And with that, I would like to hand back to Stefan. Thank you very much.